Question 2 (6 points)
On January 1, 2016, XYZ Company purchased 10,000 shares of the stock of Rayco, and did obtain significant influence. The investment is intended as a long-term investment. The stock was purchased for $90,000, and represents a 30% ownership stake. Rayco made $25,000 of net income in 2014, and paid dividends of $10,000. The price of Rayco’s stock increased from $10 per share at the beginning of the year, to $12 per share at the end of the year.
- Prepare the January 1 and December 31 general journal entries for XYZ Company.
- How much should the XYZ Company report on the balance sheet for the investment in Rayco at the end of 2016?